Corporate Governance

Background
Batas Pambansa 68 (The Corporation Code of the Phili Approved: May 1, 1980 Pres. Ferdinand
ppines E. Marcos
Republic Act 11232 (An Act Providing for the Revised Approved: Feb 20, 2019 Pres. Rordrigo R.
Corporation Code of the Philippines) Duterte
Governance

◦ Establishment of policies, and continuous monitoring of their

proper implementation, by the members of the governing body of
an organization. It includes the mechanisms required to balance the
powers of the members (with the associated accountability), and
their primary duty of enhancing the prosperity and viability of the
organization.
Read more: http://www.businessdictionary.com/definition/governance.html
Corporate Governance

◦ The framework of rules and practices by which a board of directors ensures

accountability, fairness, and transparency in a company's relationship with its all
stakeholders (financiers, customers, management, employees, government, and the
community).
The corporate governance framework consists of (1) explicit and implicit contracts
between the company and the stakeholders for distribution of responsibilities, rights, and
rewards, (2) procedures for reconciling the sometimes conflicting interests of
stakeholders in accordance with their duties, privileges, and roles, and (3) procedures for
proper supervision, control, and information-flows to serve as a system of checks-and-
balances.
Read more: http://www.businessdictionary.com/definition/corporate-governance.html
 RA11232
SEC. 5. Corporators and Incorporators,
Stockholders and Members. – Corporators
are those who compose a corporation,
whether as stockholders or shareholders in
a stock corporation or as members in a
nonstock corporation. Incorporators are
those stockholders or members mentioned
in the articles of incorporation as originally
forming and composing the corporation and
who are signatories thereof.
BP68
Section 5. Corporators and incorporators,
stockholders and members. – Corporators
are those who compose a corporation,
whether as stockholders or as members.
Incorporators are those stockholders or
members mentioned in the articles of
incorporation as originally forming and
composing the corporation and who are
signatories thereof.
Corporators in a stock corporation are
called stockholders or shareholders.
Corporators in a non-stock corporation are
called members. (4a)
 RA1132
SEC. 10. Number and Qualifications of
Incorporators. – Any person, partnership,
association or corporation, singly or jointly with
others but not more than fifteen (15) in number, may
organize a corporation for any lawful purpose or
purposes: Provided, That natural persons who are
licensed to practice a profession, and partnerships or
associations organized for the purpose of practicing
a profession, shall not be allowed to organize as a
corporation unless otherwise provided under special
laws. Incorporators who are natural persons must be
of legal age.
Each incorporator of a stock corporation must own
or be a subscriber to at least one (1) share of the
capital stock.
A corporation with a single stockholder is
considered a One Person Corporation as described
in Title XIII, Chapter III of this Code.
BP68
Section 10. Number and qualifications
of incorporators. – Any number of
natural persons not less than five (5)
but not more than fifteen (15), all of
legal age and a majority of whom are
residents of the Philippines, may form
a private corporation for any lawful
purpose or purposes. Each of the
incorporators of s stock corporation
must own or be a subscriber to at least
one (1) share of the capital stock of the
corporation. (6a)
 RA1132
SEC. 11. Corporate Term. – A corporation shall have perpetual
existence unless its articles of incorporation provides otherwise.
Corporations with certificates of incorporation issued prior to the
effectivity of this Code, and which continue to exist, shall have
perpetual existence, unless the corporation, upon a vote of its
stockholders representing a majority of its outstanding capital
stock, notifies the Commission that it elects to retain its specific
corporate term pursuant to its articles of incorporation: Provided,
That any change in the corporate term under this section is without
prejudice to the appraisal right of dissenting stockholders in
accordance with the provisions of this Code.
A corporate term for a specific period may be extended or
shortened by amending the articles of incorporation: Provided,
That no extension may be made earlier than three (3) years prior to
the original or subsequent expiry date(s) unless there are
justifiable reasons for an earlier extension as may be determined
by the Commission: Provided, further, That such extension of the
corporate term shall take effect only on the day following the
original or subsequent expiry date(s).
BP68
Section 11. Corporate term. – A corporation
shall exist for a period not exceeding fifty (50)
years from the date of incorporation unless
sooner dissolved or unless said period is
extended. The corporate term as originally
stated in the articles of incorporation may be
extended for periods not exceeding fifty (50)
years in any single instance by an amendment
of the articles of incorporation, in accordance
with this Code; Provided, That no extension can
be made earlier than five (5) years prior to the
original or subsequent expiry date(s) unless
there are justifiable reasons for an earlier
extension as may be determined by the
Securities and Exchange Commission. (6)
 RA1132 BP68
SEC. 11. Continued Section
A corporation whose term has expired may apply for a revival of its 11. Corporate
term. –
corporate existence, together with all the rights and privileges under its
certificate of incorporation and subject to all of its duties, debts and
liabilities existing prior to its revival. Upon approval by the Commission,
the corporation shall be deemed revived and a certificate of revival of
corporate existence shall be issued, giving it perpetual existence, unless
its application for revival provides otherwise.
No application for revival of certificate of incorporation of banks,
banking and quasi- banking institutions, preneed, insurance and trust
companies, non-stock savings and loan associations (NSSLAs),
pawnshops, corporations engaged in money service business, and other
financial intermediaries shall be approved by the Commission unless
accompanied by a favorable recommendation of the appropriate
government agency.
 RA1132 BP68

SEC. 12. Minimum Section 12. Minimum capital stock required of stock corporations. –
Capital Stock Not Stock corporations incorporated under this Code shall not be
required to have any minimum authorized capital stock except as
Required of Stock otherwise specifically provided for by special law, and subject to the
Corporations. – provisions of the following section.
Stock corporations Section 13. Amount of capital stock to be subscribed and paid for
shall not be the purposes of incorporation. – At least twenty-five percent (25%)
required to have a of the authorized capital stock as stated in the articles of
minimum capital incorporation must be subscribed at the time of incorporation, and at
least twenty-five (25%) per cent of the total subscription must be
stock, except as paid upon subscription, the balance to be payable on a date or dates
otherwise fixed in the contract of subscription without need of call, or in the
specifically absence of a fixed date or dates, upon call for payment by the board
provided by special of directors: Provided, however, That in no case shall the paid-up
law. capital be less than five Thousand (P5,000.00) pesos. (n)
 RA1132
SEC. 22. The Board of Directors or Trustees of a
Corporation; Qualification and Term. – Unless
otherwise provided in this Code, the board of
directors or trustees shall exercise the corporate
powers, conduct all business, and control all
properties of the corporation.
Directors shall be elected for a term of one (1) year
from among the holders of stocks registered in the
corporation’s books, while trustees shall be elected
for a term not exceeding three (3) years from among
the members of the corporation. Each director and
trustee shall hold office until the successor is elected
and qualified. A director who ceases to own at least
one (1) share of stock or a trustee who ceases to be a
member of the corporation shall cease to be such.
BP68
Section 23. The board of directors or trustees. – Unless
otherwise provided in this Code, the corporate powers of
all corporations formed under this Code shall be
exercised, all business conducted and all property of such
corporations controlled and held by the board of directors
or trustees to be elected from among the holders of stocks,
or where there is no stock, from among the members of
the corporation, who shall hold office for one (1) year
until their successors are elected and qualified. (28a)
Every director must own at least one (1) share of the
capital stock of the corporation of which he is a director,
which share shall stand in his name on the books of the
corporation. Any director who ceases to be the owner of at
least one (1) share of the capital stock of the corporation
of which he is a director shall thereby cease to be a
director. Trustees of non-stock corporations must be
members thereof. A majority of the directors or trustees of
all corporations organized under this Code must be
residents of the Philippines.
 RA1132 BP68
SEC. 22. The Board of Directors or Trustees of a Corporation;
The board of the following corporations vested with public interest shall have independent
directors constituting at least twenty percent (20%) of such board:
a) Corporations covered by Section 17.2 of Republic Act No. 8799, otherwise known as “The
Securities Regulation Code”, namely those whose securities are registered with the
Commission, corporations listed with an exchange or with assets of at least Fifty million
pesos (P50,000,000.00) and having two hundred (200) or more holders of shares, each
holding at least one hundred (100) shares of a class of its equity shares;
b) Banks and quasi-banks, NSSLAs, pawnshops, corporations engaged in money service
business, pre-need, trust and insurance companies, and other financial intermediaries; and
c) Other corporations engaged in business vested with public interest similar to the above, as
may be determined by the Commission, after taking into account relevant factors which are
germane to the objective and purpose of requiring the election of an independent director,
such as the extent of minority ownership, type of financial products or securities issued or
offered to investors, public interest involved in the nature of business operations, and other
analogous factors.
 RA1132 BP68

SEC. 22. The Board of Directors or Trustees of a Corporation;

An independent director is a person who, apart from shareholdings and
fees received from the corporation, is independent of management and
free from any business or other relationship which could, or could
reasonably be perceived to materially interfere with the exercise of
independent judgment in carrying out the responsibilities as a director.
Independent directors must be elected by the shareholders present or
entitled to vote in absentia during the election of directors. Independent
directors shall be subject to rules and regulations governing their
qualifications, disqualifications, voting requirements, duration of term
and term limit, maximum number of board memberships and other
requirements that the Commission will prescribe to strengthen their
independence and align with international best practices.
 RA1132
SEC. 23. Election of Directors or Trustees. –
Except when the exclusive right is reserved for holders of
founders’ shares under Section 7 of this Code, each
stockholder or member shall have the right to nominate
any director or trustee who possesses all of the
qualifications and none of the disqualifications set forth
in this Code.
At all elections of directors or trustees, there must be
present, either in person or through a representative
authorized to act by written proxy, the owners of majority
of the outstanding capital stock, or if there be no capital
stock, a majority of the members entitled to vote. When
so authorized in the bylaws or by a majority of the board
of directors, the stockholders or members may also vote
through remote communication or in absentia: Provided,
That the right to vote through such modes may be
exercised in corporations vested with public interest,
notwithstanding the absence of a provision in the bylaws
of such corporations.
BP68
Section 24. Election of directors or trustees. – At all elections of
directors or trustees, there must be present, either in person or by
representative authorized to act by written proxy, the owners of a
majority of the outstanding capital stock, or if there be no capital
stock, a majority of the members entitled to vote. The election
must be by ballot if requested by any voting stockholder or
member. In stock corporations, every stockholder entitled to vote
shall have the right to vote in person or by proxy the number of
shares of stock standing, at the time fixed in the by-laws, in his
own name on the stock books of the corporation, or where the by-
laws are silent, at the time of the election; and said stockholder
may vote such number of shares for as many persons as there are
directors to be elected or he may cumulate said shares and give
one candidate as many votes as the number of directors to be
elected multiplied by the number of his shares shall equal, or he
may distribute them on the same principle among as many
candidates as he shall see fit: Provided, That the total number of
votes cast by him shall not exceed the number of shares owned by
him as shown in the books of the corporation multiplied by the
whole number of directors to be elected: 
 RA1132 BP68
SEC. 23. Election of Directors or Trustees -- A stockholder or Section 24. Election of directors or trustees. –
member who participates through remote communication or in
absentia, shall be deemed present for purposes of quorum.
The election must be by ballot if requested by any voting
stockholder or member.
In stock corporations, stockholders entitled to vote shall have the
right to vote the number of shares of stock standing in their own
names in the stock books of the corporation at the time fixed in the
bylaws or where the bylaws are silent, at the time of the election.
The said stockholder may: (a) vote such number of shares for as
many persons as there are directors to be elected; (b) cumulate said
shares and give one (1) candidate as many votes as the number of
directors to be elected multiplied by the number of the shares
owned; or (c) distribute them on the same principle among as
many candidates as may be seen fit: Provided, That the total
number of votes cast shall not exceed the number of shares owned
by the stockholders as shown in the books of the corporation
multiplied by the whole number of directors to be elected:
 RA1132
SEC. 23. Election of Directors or Trustees --
Provided, however, That no delinquent stock shall be
voted. Unless otherwise provided in the articles of
incorporation or in the bylaws, members of nonstock
corporations may cast as many votes as there are
trustees to be elected but may not cast more than one
(1) vote for one (1) candidate. Nominees for directors
or trustees receiving the highest number of votes shall
be declared elected.
If no election is held, or the owners of majority of the
outstanding capital stock or majority of the members
entitled to vote are not present in person, by proxy, or
through remote communication or not voting in
absentia at the meeting, such meeting may be
adjourned and the corporation shall proceed in
accordance with Section 25 of this Code.
The directors or trustees elected shall perform their
duties as prescribed by law, rules of good corporate
governance, and bylaws of the corporation.
BP68
Provided, however, That no delinquent stock
shall be voted. Unless otherwise provided in the
articles of incorporation or in the by-laws,
members of corporations which have no capital
stock may cast as many votes as there are
trustees to be elected but may not cast more than
one vote for one candidate. Candidates receiving
the highest number of votes shall be declared
elected. Any meeting of the stockholders or
members called for an election may adjourn
from day to day or from time to time but not
sine die or indefinitely if, for any reason, no
election is held, or if there are not present or
represented by proxy, at the meeting, the owners
of a majority of the outstanding capital stock, or
if there be no capital stock, a majority of the
member entitled to vote. (31a)
 RA1132
SEC. 24. Corporate Officers. – Immediately after their
election, the directors of a corporation must formally
organize and elect: (a) a president, who must be a
director; (b) a treasurer, who must be a resident; (c) a
secretary, who must be a citizen and resident of the
Philippines; and (d) such other officers as may be
provided in the bylaws. If the corporation is vested
with public interest, the board shall also elect a
compliance officer. The same person may hold two
(2) or more positions concurrently, except that no one
shall act as president and secretary or as president and
treasurer at the same time, unless otherwise allowed
in this Code.
The officers shall manage the corporation and
perform such duties as may be provided in the bylaws
and/or as resolved by the board of directors.
BP68
Section 25. Corporate officers, quorum. – Immediately after their
election, the directors of a corporation must formally organize by the
election of a president, who shall be a director, a treasurer who may
or may not be a director, a secretary who shall be a resident and
citizen of the Philippines, and such other officers as may be provided
for in the by-laws. Any two (2) or more positions may be held
concurrently by the same person, except that no one shall act as
president and secretary or as president and treasurer at the same time.
The directors or trustees and officers to be elected shall perform the
duties enjoined on them by law and the by-laws of the corporation.
Unless the articles of incorporation or the by-laws provide for a
greater majority, a majority of the number of directors or trustees as
fixed in the articles of incorporation shall constitute a quorum for the
transaction of corporate business, and every decision of at least a
majority of the directors or trustees present at a meeting at which
there is a quorum shall be valid as a corporate act, except for the
election of officers which shall require the vote of a majority of all
the members of the board.
Directors or trustees cannot attend or vote by proxy at board
meetings. 
 RA1132
SEC. 30. Liability of Directors, Trustees or Officers.
– Directors or trustees who willfully and knowingly
vote for or assent to patently unlawful acts of the
corporation or who are guilty of gross negligence or
bad faith in directing the affairs of the corporation or
acquire any personal or pecuniary interest in conflict
with their duty as such directors or trustees shall be
liable jointly and severally for all damages resulting
therefrom suffered by the corporation, its
stockholders or members and other persons.
A director, trustee, or officer shall not attempt to
acquire, or acquire any interest adverse to the
corporation in respect of any matter which has been
reposed in them in confidence, and upon which,
equity imposes a disability upon themselves to deal in
their own behalf; otherwise the said director, trustee,
or officer shall be liable as a trustee for the
corporation and must account for the profits which
otherwise would have accrued to the corporation.
BP68
Section 31. Liability of directors, trustees or officers. –
Directors or trustees who wilfully and knowingly vote for
or assent to patently unlawful acts of the corporation or
who are guilty of gross negligence or bad faith in
directing the affairs of the corporation or acquire any
personal or pecuniary interest in conflict with their duty
as such directors or trustees shall be liable jointly and
severally for all damages resulting therefrom suffered by
the corporation, its stockholders or members and other
persons.
When a director, trustee or officer attempts to acquire or
acquires, in violation of his duty, any interest adverse to
the corporation in respect of any matter which has been
reposed in him in confidence, as to which equity imposes
a disability upon him to deal in his own behalf, he shall
be liable as a trustee for the corporation and must account
for the profits which otherwise would have accrued to the
corporation.
 RA1132
SEC. 31. Dealings of Directors, Trustees or Officers
with the Corporation. – A contract of the corporation
with (1) one or more of its directors, trustees, officers or
their spouses and relatives within the fourth civil degree
of consanguinity or affinity is voidable, at the option of
such corporation, unless all the following conditions are
present:
(a) The presence of such director or trustee in the board
meeting in which the contract was approved was not
necessary to constitute a quorum for such meeting;
(b) The vote of such director or trustee was not
necessary for the approval of the contract;
(c) The contract is fair and reasonable under the
circumstances;
(d) In case of corporations vested with public interest,
material contracts are approved by at least two-thirds
(2/3) of the entire membership of the board, with at
least a majority of the independent directors voting to
approve the material contract; and
(e) In case of an officer, the contract has been
previously authorized by the board of directors.
BP68
Section 32. Dealings of directors, trustees or
officers with the corporation. – A contract of the
corporation with one or more of its directors or
trustees or officers is voidable, at the option of
such corporation, unless all the following
conditions are present:
1. That the presence of such director or trustee in
the board meeting in which the contract was
approved was not necessary to constitute a quorum
for such meeting;
2. That the vote of such director or trustee was not
necessary for the approval of the contract;
3. That the contract is fair and reasonable under
the circumstances; and
4. That in case of an officer, the contract has been
previously authorized by the board of directors.
 RA1132
SEC. 31. Dealings of Directors, Trustees or
Officers with the Corporation. – Where any of
the first three (3) conditions set forth in the
preceding paragraph is absent, in the case of a
contract with a director or trustee, such
contract may be ratified by the vote of the
stockholders representing at least two-thirds
(2/3) of the outstanding capital stock or of at
least two-thirds (2/3) of the members in a
meeting called for the purpose: Provided, That
full disclosure of the adverse interest of the
directors or trustees involved is made at such
meeting and the contract is fair and reasonable
under the circumstances.
BP68
Section 32. Dealings of directors, trustees or
officers with the corporation. – Where any of
the first two conditions set forth in the
preceding paragraph is absent, in the case of a
contract with a director or trustee, such
contract may be ratified by the vote of the
stockholders representing at least two-thirds
(2/3) of the outstanding capital stock or of at
least two-thirds (2/3) of the members in a
meeting called for the purpose: Provided, That
full disclosure of the adverse interest of the
directors or trustees involved is made at such
meeting: Provided, however, That the contract
is fair and reasonable under the circumstances.
Chapter III One Person Corporation
◦ SEC. 115. Applicability of Provisions to One Person Corporations. – The provisions of this Title shall
primarily apply to One Person Corporations. Other provisions of this Code apply suppletorily, except as
otherwise provided in this Title.
◦ SEC. 116. One Person Corporation. – A One Person Corporation is a corporation with a single
stockholder: Provided, That only a natural person, trust, or an estate may form a One Person Corporation.
◦ Banks and quasi-banks, pre-need, trust, insurance, public and publicly-listed companies, and non-
chartered government-owned and -controlled corporations may not incorporate as One Person
Corporations: Provided, further, That a natural person who is licensed to exercise a profession may not
organize as a One Person Corporation for the purpose of exercising such profession except as otherwise
provided under special laws.
◦ SEC. 117. Minimum Capital Stock Required for One Person Corporation. – A One Person Corporation
shall not be required to have a minimum authorized capital stock except as otherwise provided by special
law.
◦ SEC. 118. Articles of Incorporation. – A One Person Corporation shall file articles of incorporation in
accordance with the requirements under Section 14 of this Code. It shall likewise substantially contain the
following:
◦ (a) If the single stockholder is a trust or an estate, the name, nationality, and residence of the trustee,
administrator, executor, guardian, conservator, custodian, or other person exercising fiduciary duties
together with the proof of such authority to act on behalf of the trust or estate; and
◦ (b) Name, nationality, residence of the nominee and alternate nominee, and the extent, coverage and
limitation of the authority.
◦ SEC. 119. Bylaws. – The One Person Corporation is not required to submit and file corporate bylaws.
◦ SEC. 120. Display of Corporate Name. – A One Person Corporation shall indicate the letters “OPC” either
below or at the end of its corporate name.
◦ SEC. 121. Single Stockholder as Director, President. – The single stockholder shall be the sole director
and president of the One Person Corporation.
◦ SEC. 122. Treasurer, Corporate Secretary, and Other Officers. – Within fifteen (15) days from the issuance of its certificate
of incorporation, the One Person Corporation shall appoint a treasurer, corporate secretary, and other officers as it may
deem necessary, and notify the Commission thereof within five (5) days from appointment.
◦ The single stockholder may not be appointed as the corporate secretary.
◦ A single stockholder who is likewise the self-appointed treasurer of the corporation shall give a bond to the Commission in
such a sum as may be required: Provided, That the said stockholder/treasurer shall undertake in writing to faithfully
administer the One Person Corporation’s funds to be received as treasurer, and to disburse and invest the same according to
the articles of incorporation as approved by the Commission. The bond shall be renewed every two (2) years or as often as
may be required.
◦ SEC. 123. Special Functions of the Corporate Secretary. – In addition to the functions designated by the One Person
Corporation, the corporate secretary shall:
◦ (a) Be responsible for maintaining the minutes book and/or records of the corporation;
◦ (b) Notify the nominee or alternate nominee of the death or incapacity of the single stockholder, which notice shall be given
no later than five (5) days from such occurrence;
◦ (c) Notify the Commission of the death of the single stockholder within five (5) days from such occurrence and stating in
such notice the names, residence addresses, and contact details of all known legal heirs; and
◦ (d) Call the nominee or alternate nominee and the known legal heirs to a meeting and advise the legal heirs with regard to,
among others, the election of a new director, amendment of the articles of incorporation, and other ancillary and/or
consequential matters.
◦ SEC. 124. Nominee and Alternate Nominee. – The single stockholder shall designate a nominee and an alternate
nominee who shall, in the event of the single stockholder’s death or incapacity, take the place of the single stockholder
as director and shall manage the corporation’s affairs.
◦ The articles of incorporation shall state the names, residence addresses and contact details of the nominee and alternate
nominee, as well as the extent and limitations of their authority in managing the affairs of the One Person Corporation.
◦ The written consent of the nominee and alternate nominee shall be attached to the application for incorporation. Such
consent may be withdrawn in writing any time before the death or incapacity of the single stockholder.
◦ SEC. 125. Term of Nominee and Alternate Nominee. – When the incapacity of the single stockholder is temporary, the
nominee shall sit as director and manage the affairs of the One Person Corporation until the stockholder, by self
determination, regains the capacity to assume such duties.
◦ In case of death or permanent incapacity of the single stockholder, the nominee shall sit as director and manage the
affairs of the One Person Corporation until the legal heirs of the single stockholder have been lawfully determined, and
the heirs have designated one of them or have agreed that the estate shall be the single stockholder of the One Person
Corporation.
◦ The alternate nominee shall sit as director and manage the One Person Corporation in case of the nominee’s inability,
incapacity, death, or refusal to discharge the functions as director and manager of the corporation, and only for the same
term and under the same conditions applicable to the nominee.
◦ SEC. 126. Change of Nominee or Alternate Nominee. – The single
stockholder may, at any time, change its nominee and alternate nominee by
submitting to the Commission the names of the new nominees and their
corresponding written consent. For this purpose, the articles of
incorporation need not be amended.
◦ SEC. 127. Minutes Book. – A One Person Corporation shall maintain a
minutes book which shall contain all actions, decisions, and resolutions
taken by the One Person Corporation.
◦ SEC. 128. Records in Lieu of Meetings. – When action is needed on any
matter, it shall be sufficient to prepare a written resolution, signed and
dated by the single stockholder, and recorded in the minutes book of the
One Person Corporation. The date of recording in the minutes book shall
be deemed to be the date of the meeting for all purposes under this Code.
◦ SEC. 129. Reportorial Requirements. – The One Person Corporation shall submit the following
within such period as the Commission may prescribe:
◦ (a) Annual financial statements audited by an independent certified public accountant: Provided,
That if the total assets or total liabilities of the corporation are less than Six Hundred Thousand
Pesos (P600,000.00), the financial statements shall be certified under oath by the corporation’s
treasurer and president.
◦ (b) A report containing explanations or comments by the president on every qualification,
reservation, or adverse remark or disclaimer made by the auditor in the latter’s report;
◦ (c) A disclosure of all self-dealings and related party transactions entered into between the One
Person Corporation and the single stockholder; and
◦ (d) Other reports as the Commission may require.
◦ For purposes of this provision, the fiscal year of a One Person Corporation shall be that set forth in
its articles of incorporation or, in the absence thereof, the calendar year.
◦ The Commission may place the corporation under delinquent status should the corporation fail to
submit the reportorial requirements three (3) times, consecutively or intermittently, within a period
of five (5) years.
◦ SEC. 130. Liability of Single Shareholder. – A sole shareholder claiming limited liability
has the burden of affirmatively showing that the corporation was adequately financed.
◦ Where the single stockholder cannot prove that the property of the One Person
Corporation is independent of the stockholder’s personal property, the stockholder shall
be jointly and severally liable for the debts and other liabilities of the One Person
Corporation.
◦ The principles of piercing the corporate veil applies with equal force to One Person
Corporations as with other corporations.
◦ SEC. 131. Conversion from an Ordinary Corporation to a One Person Corporation. –
When a single stockholder acquires all the stocks of an ordinary stock corporation, the
latter may apply for conversion into a One Person Corporation, subject to the submission
of such documents as the Commission may require. If the application for conversion is
approved, the Commission shall issue a certificate of filing of amended articles of
incorporation reflecting the conversion. The One Person Corporation converted from an
ordinary stock corporation shall succeed the latter and be legally responsible for all the
latter’s outstanding liabilities as of the date of conversion.
◦ SEC. 132. Conversion from a One Person Corporation to an Ordinary Stock Corporation. – A One
Person Corporation may be converted into an ordinary stock corporation after due notice to the
Commission of such fact and of the circumstances leading to the conversion, and after compliance
with all other requirements for stock corporations under this Code and applicable rules. Such notice
shall be filed with the Commission within sixty (60) days from the occurrence of the circumstances
leading to the conversion into an ordinary stock corporation. If all requirements have been complied
with, the Commission shall issue a certificate of filing of amended articles of incorporation reflecting
the conversion.
◦ In case of death of the single stockholder, the nominee or alternate nominee shall transfer the shares
to the duly designated legal heir or estate within seven (7) days from receipt of either an affidavit of
heirship or self-adjudication executed by a sole heir, or any other legal document declaring the legal
heirs of the single stockholder and notify the Commission of the transfer. Within sixty (60) days from
the transfer of the shares, the legal heirs shall notify the Commission of their decision to either wind
up and dissolve the One Person Corporation or convert it into an ordinary stock corporation.
◦ The ordinary stock corporation converted from a One Person Corporation shall succeed the latter and
be legally responsible for all the latter’s outstanding liabilities as of the date of conversion.